An impending trade deal with Europe is ringing alarm bells across the country.

Under the deal, Canada has agreed to European demands to prohibit municipalities and provinces from offering incentives or otherwise favouring local bidders on procurement contracts.

The effects on Toronto could be serious:

Could the TTC still impose Canadian content rules for its vehicles if faced with a European trade challenge? Could the city continue to ensure certain construction projects hire youths from priority neighbourhoods? Could the city still award food procurement contracts to support local farmers?

A special report by city manager Joseph Pennachetti and obtained by the Star raises red flags about its consequences.

And last week, Toronto’s executive committee, armed with the report, asked Ontario to ensure municipal procurement needs are preserved under the trade deal. It thereby joined 34 towns and cities across Canada that filed similar protests — some seeking outright exemptions.

“We are alarmed,” said city councillor Michael Thompson, an executive committee member.

“We want to take a position that supports free trade (but) we don’t want to see our economic independence impacted in a negative way,” said Thompson, adding that the committee’s biggest concern is that it doesn’t understand the process.

Under the draft agreement, any contracts above $340,000 for goods and services and $8.5 million for construction would be subject to challenge if a European company thought it was being excluded.

Stuart Trew, a Council of Canadians trade campaigner, says the U.S. government and states always carve out protection for “Buy America” policies in their trade deals. “But in CETA, ‘Buy Canada’ simply disappears over the low thresholds — which seems like a big thing to throw away forever.”

Councillor Glenn De Baeremaeker, who sought a full exemption, argues the deal jeopardizes Toronto’s economic future: “There’s a Trojan horse outside city hall, it’s being invited in and we have no idea at all what’s going to happen.”

The pact is called the Canada/European Union Comprehensive Economic and Trade Agreement (CETA) and its scope is unprecedented. The previous comprehensive deal signed by Canada, the U.S. and Mexico (NAFTA) covers only federal procurement.

This time, Europe was “determined” to open up all levels of government, according to the Feb. 2 Pennachetti report. The deal accesses “ABCCDs” — the city’s agencies, boards, commissions, corporations and divisions. They include the TTC, nursing homes and the water system. And the same rules also apply to provincial agencies for the first time.

It may already be too late for exemptions, according to Ontario Economic Development Minister Brad Duguid.

“The challenge with exempting municipalities is that, once you start, you might exempt your way right out of an agreement . . . . It’s a slippery slope and not something I would contemplate doing.”

Talks began in 2009 and officials completed their ninth and apparently final round last October, with the agreement expected to be signed by summer.

“The ultimate implications of CETA are difficult to predict,” says the Pennachetti report. “This is particularly true given that offers have not been made public and there has been very little analysis shared by federal negotiators about the specific Canadian industries or labour force members that would benefit.”

Concerned citizens across the country have banded together to fight the deal. They include municipal politicians, activists, farmers, environmentalists, economists, students, teachers and students.

In Noëlville, in the French River region of Ontario, Julie Dupuis supports her council’s decision to seek an exemption. For her, it’s deeply personal. She says her great-grandfather was a co-founder of the caisse populaire in an area where coureurs des bois once travelled. It’s important to buy and hire locally, she says, and ensure residents have control over their own development in such a beautiful environment.

Brian McHattie, a Hamilton councillor who spearheaded a successful exemption motion, argues cities will lose their ability to control local hires and value-added benefits. He sees “large European firms coming in and bidding against us on infrastructure projects or sewage treatment plants and that’s a hugely unfair advantage.”

In Sackville, N.B., Merrill Fullerton fought as a rookie councillor for exemption from CETA because he says growing globalization, including more than two decades of trade deals, left his city without foundries and many blue-collar industries. He doesn’t blame trade deals alone, but sees a pattern of people pitted against global giants — and losing.

International Trade Minister Ed Fast was not available for comment. But an aide sent an email: “With one in five Canadian jobs generated by trade, we will continue to deepen our trade and economic ties with high growth markets to set the foundations for long-term economic growth in Canada.”

The Pennachetti report says the deal could provide significant new markets, but that strategies must be in place to ensure “the agreement delivers on promised benefits.”

It says a Canadian/European study estimates a comprehensive deal will result in an annual GDP increase of $15.6 billion (Canadian) for the EU and about $11 billion for Canada

Public policy lawyer Steven Shrybman condemns the secrecy behind this latest deal in Ottawa’s brisk march of successive trade and investment deals that also include, talks with China and Japan, along with broader agreements with Pacific nations and more deals with the U.S. under the umbrella of North American Perimeter talks.

“The whole thing is just outrageous,” he said. “What possible justification can they have for doing this all in secret, hidden from their own citizens? It’s tantamount to writing a new economic constitution for the country and Canadians are being kept out of it.”

• Toronto’s local food procurement policy to “reduce the greenhouse gas emissions associated with the provision of food purchased for city operations and facilities, plus support for local farmers.”

• The TTC policy that states that transit vehicles procured using any sources of provincial funding must have 25 per cent Canadian content, in accordance with provincial requirements.

• Strategic procurement that’s used to help strengthen and expand Toronto, Ontario and Canada-based companies by “pulling” locally developed innovative services into the marketplace, helping create local jobs and expand the tax base, i.e., Ontario’s feed-in tariff program to develop renewable energy that contains a local manufacturing content.

Trade disputes go to arbitration panels, not the courts. The report questions whether a challenge under the dispute settlement mechanism would shut down all procurement on a construction project in Toronto.

De Baeremaeker says CETA invites European multi-nationals to ignore a city’s attempts to impose local incentives because they’re toothless.

For instance, he asks what would happen to a municipal ban on selling bottled water at city events if a big European bottler appeared on the scene.

Municipalities have no place at the bargaining table and must rely on the provinces.

The agreement goes beyond public procurement to include investment and services, intellectual property rights, dispute settlement, sustainable development (labour and environment) and regulatory cooperation. It gives European companies equal treatment with Canadian companies.

Osgoode professor Gus Van Harten, an expert in international investment law, says it’s understandable the Pennachetti report cites growing opposition to the accord. “This deal isn’t an issue of left or right, particularly after the Caterpillar shutdown,” he said by phone from Burlington. “That was a wake-up call. I know people in Burlington, very conservative people, and all they care about is whether their kids will have jobs.”

Van Harten believes it’s vital Canadians understand that dispute settlement in trade disputes “trumps Canadian legislatures and courts and are all-powerful . . . It’s been my experience their interests lay on the side of the investor.”

This is particularly worrisome, he says, because Canada doesn’t have the best reputation for fighting back when challenged by big companies. Ottawa paid Abitibi-Bowater $130 million rather than face a challenge under a NAFTA panel for lands, timber and water rights the company claimed they owned when they were expropriated by the Newfoundland government.

As a professor at the London School of Economics, he learned the motto for a business conflicts: “Whatever you do, don’t pull a Canada.”

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